From Tabloids to Tablets: Commercial Opportunities On Apple’s Newsstand.

Before the Internet and personal computers, people relied on daily newspapers to stay up to date on current events. Seemingly overnight, the rise of the Internet put our paperboys out of work and crowned digital news king. People began using desktop or laptop computers to access news anytime, increasing the velocity of information in the news world. In the last five years, however, it’s the Web that’s been gathering dust. The rapid proliferation of smartphone devices has enabled audiences to consume news not only at any time, but also from any location and through apps that optimize the reading experience. In the past five years, Amazon and Apple in particular have built entire ecosystems from the ground up, and have turned on their heads the entire content distribution and monetization strategies of just about every major publisher in the world. Time Inc’s CEO Laura Lang echoes this wholesale change: “People love reading our digital magazines already on iPad and we are confident we can deliver an even greater consumer experience on Newsstand with digital subscriptions.” Whilst the printed newspaper was invented over four hundred years ago, it’s the last decade that has changed the face of the written word.

Tabloids to Tablets: we’ve come a long way.

So nearly a year after Apple launched Newsstand, and on the day that Amazon comes to the world with its rumored release of the newest Amazon Kindle device, we wanted to provide some market insights to assess the opportunities that lie in mobile apps for news and magazine publishers.

Readers are reading (and spending) more on mobile

Readers are reading more.A recent study by Pew Research Center found that nearly a quarter of Americans regularly get their news from a mobile device (smartphone or tablet). Not only that, those using mobile devices for news consume more content and return to the news site or app more frequently than they do on computers. The Apple App Store is capitalizing on this new consumer trend, by organizing the world’s digital news into a virtual newsstand. As is the Apple mantra, this vastly improves the total user experience for the reader – thereby driving greater traffic and revenue opportunities for media properties trying to reach these audiences. Readers are spending more. Over the past five years, Apple has built an audience with the sales of over 316 million iOS devices, more than all the Macs sold in 28 years of Apple business. Consequently, the iOS Newsstand has seen an impressive revenue growth of 407 percent since it launched. It’s clear that Apple’s user-centric and simple approach to design is making it easier for readers to reach into their virtual wallets and pay for content.

iOS Newsstand Revenue Grows 407 percent over 10 months

Traditional news adapting to the new world of app monetization

The biggest challenge publishers face is how to monetize in a digital world where so much content is free. Unlike the web, app stores are at least minimally curated or filtered, making it a great place for quality brands to monetize loyal audiences within a controlled environment. But how to monetize?

Since before we were all born, the publishing industry has been built off a combination of subscription, pay per issue and advertising business models. And although there are those that write it’s a completely new world out there, the truth is that it’s more of an evolution, not a revolution. Pay per issue becomes pay per download, stamp-licked subscription is replaced by subscription through In-App Purchase, and print advertising models are being replaced through digital advertising models. But of course, it’s not quite that simple – a few trends to point out.

In-App Purchases are your best gateway to revenue generation. If the numbers are anything to go by, then if you haven’t integrated in-app purchases, you’re likely not making much money on Newsstand. We’ll give you two stats to illustrate that – 88% of Newsstand apps globally have in-app purchases integrated into their app, but 99.5% of all Newsstand revenue is generated from that 88% – meaning that those 12% of apps without in-app purchases are generating less than 0.5% of Newsstand global revenue.

iOS Newsstand Apps with In-App Purchases Generate Higher Revenue

Publishers are experimenting with alternative forms of monetization. In June, Flipboard announced its plans to use paywall to monetize The New York Times content, a system that prevents Internet users from accessing webpage content without a paid subscription. For other publications, they’ve focused their efforts on avoiding the standard platform 30 percent cut through mobile web apps. Last September, The Financial Times defiantly pulled their paid app from iTunes and exchanged it with a free web-based HTML 5 app to drive subscriptions outside the app store and out of the grasp of Apple. However, with so many smartphone users discovering apps through the app store, this is an undertaking that only a brand with an already huge base of loyal users can even consider. Building a mobile audience through mobile web user acquisition is not impossible, but has its challenges.iPad still dwarfs iPhone for Newsstand revenue. Readers favor the larger screen, so focus your efforts on monetizing iPad users, even if the overall audience is smaller. Newsstand revenues on iPad are currently three times the size of those on iPhone, although iPhone revenues have grown at a lightning pace of more than 3200% since Newsstand launch.

iPad dwarfs iPhone in Newsstand Revenue

Brand names taking all the headlines

Amongst the most popular Newsstand apps, established brand names in the ‘News’ and ‘Lifestyle’ categories shine. Unlike other apps, where new start-ups like Instagram, Rovio and Path dominate the charts, the Newsstand charts are dominated by brands that have dominated publishing for decades. The top five apps by downloads and revenues are made up of the likes of The New York Times, Cosmopolitan and The New Yorker. The New York Times deserves special mention for occupying the top spot both by downloads and revenue. The Daily also deserves recognition for being the only first to app store brand on the list.

Top 5 Apps by Worldwide Downloads and Revenues

However, you also have the aggregators – Flipboard, Zite and Pulse who combine content from a variety of partners to offer the ultimate in convenience and user experience. These well-designed apps allow users to discover content not just from the publication brand names they know, but also from the ones they may discover from publisher curating, social recommendation and other viral mechanisms. In a world where a reputation going back hundreds of years is not solely enough to build, engage and retain an audience, the publishing industry has realized the need to engage with these new forms of content discovery whilst also adapting to the new app store platform.

Global Trends In A Global Newsstand

The key advantage afforded to publishers by app stores is the ability to publish content to 155 regional stores worldwide, optimized for a mobile experience. Where are the readers of the world, and where are the major commercial opportunities for global publishers?

The China Hot Air Balloon. Due to its astounding population and growing access to smart phones, China overtook the U.S. to become the leading country for number of Newsstand downloads from Q1 to Q2 this year. However, by revenue, America dominates, while China finds itself in 19th position.

Top 5 Apps by Worldwide Downloads and Revenues

The China trend doesn’t end there. With most app categories, China audiences are consuming a combination of local and foreign content (think Angry Birds and Fruit Ninja). Not the case with Newsstand, where language is much more critical than with the games category. It’s largely Chinese audiences consuming Chinese content from Chinese publishers which drive downloads. Looking at the Top 20 downloaded Newsstand apps by country origin of the publisher, China accounts for 7 apps, followed by the US, UK and Canada. By revenue on the other hand, the US dominates with 16 apps, followed by the UK and Norway.

7 of the most downloaded apps in the world are from Chinese publishers; the most lucrative apps though come from the US

The China Newsstand. Top 10 Free dominated by Chinese apps, Top 10 Paid dominated by English language apps

Revenue generation still dominated by Western countries. By analyzing revenue per download, the top ranked countries are Norway, Australia, Switzerland and the United Kingdom, with the U.S. further down the pack in the eighth position. Across the top ten countries, the average revenue per app is $0.97, more than two times the worldwide average of $0.45. There are several interesting threads across these lucrative countries – seven are English speaking, nine are in the Top 25 by GDP per capita and five are European. If you as a publisher are looking to monetize off your downloads at a high rate, then you may want to focus your user acquisition efforts in these regions.

Top 10 countries pay more than 2 times the worldwide average

What is your Newsstand strategy?

Any newspaper and magazine publisher will need a multi-channel content distribution strategy to effectively reach their most valuable audiences. And Newsstand will need to be a key part of that strategy. Some key insights to take with you:

Readers are reading and spending more on Newsstand

– Apps with in-app purchases generate 99.5% of all Newsstand revenue
– iPad generating three times the Newsstand revenue of iPhone
– Newsstand is currently dominated by the big publishing brands
– Chinese apps consumed by Chinese audiences are dominating global Newsstand downloads, but true monetization opportunities lie in Western countries.

If the past five years of change are anything to go by, the next 12 months will be a big year for the publishing industry. The technology behind tablet, smartphones and app stores provide publishers with a more efficient way to reach their audiences – the question is, can they adapt their business models to capitalize on these trends?

Remember, keep yourself informed of the latest market data to ensure you’re ahead of the curve.

METHODOLOGY DISCLAIMERThe analyses and insights discussed were drawn from App Annie’s Intelligence data. App Annie takes responsibility for the claims and insights in this article that are based on this data and research. However, App Annie does not take responsibility for any actions or outcomes undertaken by 3rd parties, as a result of this article or the analyses or data contained within.